Mortgage firms have more pain in store

Is there an expensive nightmare lurking in your mortgage documents? You may think you are sitting pretty on a tracker mortgage or a comfortable SVR. However, one expert has been warning that you may not be as safe as you think you are.

He says we need to check the documents closely, because there may well be a nasty surprise lurking.

Pain awaits

Ray Boulger, mortgage expert with broker Charcol, told the Daily Telegraph that there were plenty of unexpected clauses lurking in forgotten documents, and that in the current environment we can expect mortgage companies to be taking full advantage of them.

He highlighted that the latest is Manchester Building Society, which is pushing up its rates, despite the fact they are meant to track the Bank of England base rate, which remains at its record low of 0.5%. It is able to do this because of clause in the contract that says that once the first five years of the contract are over the rates can be raised - as long as customers are given a year's notice.

The building society defended the move as balancing the needs of its borrowers and savers, and highlighted that only a small number of borrowers would be affected. However, it isn't the first to take this sort of step. Skipton Building Society has also changed the rules on its SVR. It previously stated that it would never rise more than 3% above the base rate, but the small print said they could break this rule in 'exceptional circumstances'. The building society said current circumstances were exceptional and raised the rate above the limit.

More to come

Boulger told AOL: "It underlines how the SVR can be moved at the discretion of the lender. In a market where the cost of funding is so high, and is unlikely to start falling any time soon, lenders are looking to things such as increasing the SVR or revisiting existing mortgages in order to take some of the pressure off."

Boulger warns that this is unlikely to be the last of these sorts of moves across the industry - because the mortgage companies are desperately trying to find a way to make loss-making mortgages pay.

What can you do?

The first step is to check the documents. It's not actually the mortgage contract itself you need by the key facts illustration. Boulger told the Telegraph that there have been instances where the clause was just in the contract and the authorities did not allow it to be invoked.

If there's something lurking in there, now is the time to see if you have any other options, and whether you are concerned enough to try to remortgage.

If you end up sticking with your mortgage, and you feel the clause is unclear in any way - or simply unfair - and your lender decides to make damaging changes to your mortgage, your first port of call should be to contact your lender. If you're not happy with the response, you can contact the Financial Ombudsman Service.

Escape

Barclays is looking to cash in on an exodus of unhappy customers - including those who are about to see their SVR rise - by launching a new range of mortgages. It includes a 'Great Escape' remortgage package at 3.89% with no application fee, free legals and valuation and £300 cashback. A spokesman said: "As customers with other lenders see an increase in their SVR this is about helping them make essential savings."

The good news is that for some there will be a way out, and they don't have to put up and shut up when their mortgage lender decides to squeeze yet more cash from them. The bad news is that for some - especially those with very little equity and large loans - there is no escape.